The Japanese yen shrugs off the GDP Number

The Japanese yen (USD/JPY) pretty much ignored the latest gross domestic product (GDP) numbers from Japan. The Japanese GDP, or economy, for the first quarter, grew by 2.2 percent annually. This was well above the 1.7 percent expected. Quarter on quarter, the island nation’s economy gained 0.5% as expected. However, the nominal GDP print fell short of estimates. This came in at zero percent, quarterly. Economists had hoped for a gain of 0.1 percent, here.

Looking into the data, more deeply, private consumption increased a tepid 0.4 percent. This was slower than the 0.5 percent growth that was expected. Business spending rose 0.2 percent, quarter on quarter. This was far better than the 0.4 percent contraction economists had estimated.

Looking in Japan’s net exports, they added only 0.1 percentage points to quarterly GDP. However, the report also revealed that export growth slowed down. They ended up falling to a growth of 8.9 percent. This is down from the growth of 14.1 percent in the fourth quarter. Private inventory added a mere 0.1 percentage points to quarterly GDP.

Markets ignore the Japanese GDP

The financial markets had a muted response to the GDP print this morning. Even though the economic growth came in than the Bank of Japan’s 2017-18 growth projections. This muted reaction is an ominous sign of its relevance. The Bank of Japan is not very likely to change its monetary policy based on the GDP. The central bank is focused more on inflation. Therefore, next week’s CPI report will be more relevant for traders.

There is also a lot of geopolitical risk in play from North Korea to problems within the administration of US President Donald Trump.